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Energy regulator set to probe Eskom's alleged breach

May 11 2017 12:41

Matthew le Cordeur

Brenda Martin, SAREC chairperson and CEO of the South African Wind Energy Association.

Cape Town – The National Energy Regulator of South Africa (Nersa) has confirmed that its electricity sub-committee has recommended that the regulator should formally investigate if Eskom is in breach of the Electricity Regulation Act for not signing power purchase agreements (PPA) with private renewable energy firms.

“Nersa can confirm that it will conduct a formal investigation regarding a complaint referred to Nersa by the South African Wind Energy Association (Sawea),” Nersa spokesperson Charles Hlebela told Fin24 on Thursday via text message.

13:20 UPDATE: Hlebela later corrected this statement, saying the move to investigate the allegations was only a recommendation and that it must be approved by the Energy Regulator. The regulator's next meeting is on 25 May, where this could be approved.

“Sawea is alleging that Eskom is in breach of the Electricity Regulation Act, 2006 and distribution and/or transmission license condition regarding the signing of the power purchase agreement," said Hlebela.

“The electricity subcommittee has recommended for approval by the energy regulator that the regulator member responsible for electricity to be the chairperson of the investigation.”

In its official complaint to Nersa, Sawea alleged that Eskom has refused to sign PPAs "with preferred bidders emanating from the Renewable Energy Independent Power Producer Procurement Programme (REIPPPPP)... We believe that Eskom’s stance is incompatible with government policy, the law of the land, and its own licence conditions."

Sawea said the decision by Nersa to investigate the complaint follows a preliminary investigation, which it said found that there were sufficient grounds to warrant further action.

"We have had confirmation from Nersa that an expedited investigation into whether Eskom is in contravention of its licence, has now commenced,” Sawea CEO Brenda Martin said in a statement on Thursday.

“We await the timeline associated with this process, which could culminate with a ruling by a Nersa tribunal. Based on previous communications with Nersa it is likely that the process will be concluded within two weeks.”

Sawea declared a dispute during October 2016, requesting Nersa to undertake an investigation into Eskom’s continued unwillingness to honour the Department of Energy’s PPAs, it explained.

“In the event that Eskom is found to be guilty of failing to comply with its licence conditions, the Industry Association further requested that Nersa impose a penalty, being 10% of its annual turnover per day, commencing on the day of receipt of the notice of contravention,” Sawea said.

Sawea has also confirmed that in subsequent communications with Nersa, the association extended the complaint to include consideration of budget quote escalation effects.

“We’d like to reiterate that our primary intention is to achieve financial closure of power purchase agreements. It remains our hope that Eskom will comply with the legal framework for power purchase, so that penalties do not need to be imposed on Eskom,” said Martin.

President Jacob Zuma directed Eskom in his 2017 State of the Nation Address to finalise the signing of the PPAs for the effected independent power producers.

This changed Eskom's tune instantly, after it had blocked the signing of the new PPAs for almost two years over concerns that the costs were too high and that the utility didn't require additional power due to a surplus of supply.